DUBLIN, Dec 19 Reuters Ireland39;s central bank cut its economic growth forecasts out to 2025 for the second successive quarter, saying on Tuesday that the economy had shifted to a slower growth path but that inflation would also fall faster than previously forecast.

The central bank reduced its forecast for modified domestic demand MDD it and the government39;s preferred measure of economic activity to 1.5 in 2023 from 2.9 previously, while making more minor downward revisions to the 2.5 and 1.9 growth seen in 2024 and 2025.

MDD soared by 9.5 last year but the most recent reading showed it flatlining in the third quarter.

The central bank said the slowdown reflected the exceptional level of physical investment by multinationals in 2022, but also also the impact of higher interest rates and capacity constraints.

The economy has shifted onto a slower growth path following a strong post pandemic recovery, the bank said in a quarterly update of its forecasts, noting that the economy was now set to grow in line with its medium term potential from 2024 to 2026.

Large foreign multinationals based in Ireland often distort gross domestic product GDP, notably through the inclusion of exports produced abroad but counted in the Irish statistics. The measure is still used to calculate Ireland39;s share of activity across the euro zone.

The central bank reiterated that GDP does not provide a good indicator of economic conditions in Ireland when slashing its forecast for 2023…